How Did the Markets React? <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
BOE raised its benchmark rates to 5% but in a classic buy the rumor sell the news dynamic all the markets reacted contrary to what might be expected with only the equities weighed down by the prospect of possibly slower growth. One possible reason for the drop in currencies and a rally in bonds aside from sheer profit taking may be some trepidation on the part of speculators that the cumulative weight on BOE rate hikes could begin to weigh on <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK consumer sentiment by increasing debt service costs. Clearly, the central bank is confident that that the UK economy can absorb the additional rate hikes, but time will only tell if the central banks hawkish stance at the time of clear evidence of global economic slowdown may in fact be a case of too much tightening too soon.
